While health care reform is not yet a done deal, odds are good it's going to become law. So whether you were for it or against it, it's time to understand it. Today we'll look at eight positives arising from the bill that could make your health insurance healthier.
Unless you’ve been living in a cave, you know the health care reform debate has been long, loud and contentious. But now that it’s over, whatever side you were on, there are positives for your future health insurance in this reform. Although many of these changes won’t be happening until years after the final bill is signed into law, exploring them now might make those opposed to the bill feel better about it.
Start by watching the following news story, then meet me on the other side for more.
So let’s go over those eight points again, this time with a little more detail.
Positive change number one: Fewer uninsured Americans should lead to a lower-cost health care system.
The core of health care reform is helping (or forcing, depending on your point of view) 30+ million uninsured Americans to find coverage. This is a direct and obvious benefit to them, but it should ultimately benefit all Americans since heath care provided to those without the ability to pay is a huge burden that resonates across the system in the form of higher costs on health care and its primary funding source, insurance.
If you don’t understand what I mean by that, check out a story I produced called “Killer Hospital Bills.” It’s about an uninsured woman who went into a hospital ER with abdominal pain and emerged with a bill for $12,000. While the size of the bill was big, the real story was that the exact same services would have been billed to a Medicare patient at $4,000 and to an insured patient at $5,000. When I interviewed the hospital CFO and asked about the discrepancy, his response was that since so many uninsured patients don’t pay at all, they’re forced to charge those that can exorbitant prices to recoup their losses.
That explanation is certainly shocking if you’re the uninsured patient facing a bill three times larger than a Medicare patient’s for the same services. On the other hand, it’s hard to blame the hospital. A store that loses millions of dollars a year to shoplifters is faced with a simple choice: charge paying customers more to recoup those losses or go belly-up. Hospitals that take patients who can’t pay (and they have to by law if a medical situation is life-threatening) are faced with the same choice: either charge those who can pay more or close their doors. Hospitals can’t charge either Medicare or insured patients more because those rates are negotiated in advance. So that leaves them with only one choice: to charge those patients who can least afford it… those without insurance… a lot more money for the same services.
Bottom line? Even if you’re an American who has health insurance and who doesn’t care at all about those who don’t, you should still be seeking out some kind of solution to a health care system that is deathly ill. It’s important to attempt to reduce the ranks of the uninsured. Any law that lowers the number of people who can’t pay should theoretically save the entire health care system a lot of money, which in turn should reduce not just the overall cost of health care, but ultimately the health insurance premiums of every American.
In addition, adding 30 million people to the overall pool of those insured means spreading the risk and expense of health care over a wider group. Over time, that should also theoretically lower the cost of coverage for all of us.
But don’t expect benefits overnight. The provision helping some Americans pay for health insurance and forcing others to (if you don’t have coverage, you can be fined up to $2,085, or 2.5% of your income) largely take place in 2014. And even then, it will be years later before we see potentially positive effects. Why couldn’t we get this key reform to take place sooner? One reason is that this legislation requires states to establish what are called American Health Benefit Exchanges: insurance pools that hope to harness increased competition to help lower prices. And establishing these exchanges will take time. Another possible reason we have to wait years is the same reason the C.A.R.D. Act didn’t go into effect immediately (thus allowing banks to raise their rates prior to enactment), because industry lobbyists wanted it that way. As the banks did when faced with laws reining in credit card abuses, expect insurance companies to attempt to make as much as possible in the years before many of these provisions become law.
Positive change number two: No more caps on coverage.
Six months after the president signs this bill, insurance companies will no longer be able to cap your coverage, either annually or over your lifetime. This is a big change, and one you’ll be happy with should you ever develop an illness that requires big bucks to address. Prior to this reform, insurance companies routinely employed lifetime caps of one to three million dollars. Which means if you spent more than that over your lifetime, you’d lose your coverage and be forced to pay every bill yourself, a virtual guarantee that you’d be bankrupt shortly thereafter.
While removing these caps could increase insurance company risk and exposure, costs that might be passed through to policyholders in the form of higher rates, it may well keep you or those who love you from going bankrupt should you run out of insurance before you run out of disease.
Positive change number three: Insurance companies can no longer refuse coverage based on preexisting medical conditions.
If you have an illness like cancer or diabetes, today, insurance companies can simply refuse to insure you, or turn you away by charging so much in premiums there’s no way you can afford to pay. Health care reform did away with that, or at least it will in 2014. Children are an exception: Starting in September, children can’t be turned down because of preexisting conditions.
Positive change number four: Keeping kids on their parent’s policy longer.
Under the new law, dependent children up to 26 years old can remain covered under their parent’s policy; twenty-one was more the norm before. Keeping kids on a parental policy is normally cheaper than insuring kids individually, and unlike the numerous provisions that wait until 2014, this one goes into effect six months after the bill becomes law.
Positive change number five: More employers will be offering coverage.
The idea behind this bill is to get as many people as possible to have health insurance. For those with no or low income, that means expanding medicaid for some and offering subsidies to others to help them pay premiums. Households that earn up to 400% of the Federal Poverty Level of $22,050 will be eligible for some sort of assistance.
But when it comes to business, the government is employing both stick and carrot to encourage more to offer coverage. The stick: By 2014, employers with more than 50 employees must provide health insurance or pay a fine of $2,000 per worker each year if any worker receives federal subsidies to purchase health insurance. The carrot: While companies with fewer than 50 workers won’t face penalties if they don’t offer insurance, they can get tax credits if they do. For example, those with 25 or fewer employees and average annual worker pay of $40,000 can get tax credits of up to 35% of the cost of the premiums in 2010, rising to 50% in 2014. These tax credits are based on the size of the business and the average pay of their workers: the smallest companies with the lowest-paid workers will get the most tax credits.
Positive change number six: Free preventive health care.
Until health care reform, preventive care coverage… like annual physicals, for example… could be subject to deductible and co-pays. The new law says this type of care is going to be free: no co-pay, no out of pocket. The idea is that this will encourage people to stay in better shape, which should theoretically translate into big health problems and big bills being nipped in the bud.
Positive change number seven: A better appeals process.
It’s hard to understand the drive for things like health care reform if you’ve never been mistreated at the hands of an insurance company or done a story about someone who has. But take it from someone who’s been a consumer reporter for 20 years: There are insurance companies that deny coverage for no other apparent reason than they don’t feel like paying. Did you ever see the movie The Rainmaker? It features an insurance company whose policy includes systematically denying all claims. While I can’t say that’s a true story, I can definitely say that many insurance companies have acted in a manner that suggests they’re more interested in their profitability than the welfare of their policy holders.
Health care reform establishes a new, more independent and consumer-oriented appeals process. So if you do have a disputed claim, your odds of having it resolved fairly should increase.
Positive change number eight: Help for seniors.
Today’s Medicare patients have coverage for the first $2,700 they spend on drugs and for any amounts over $6,154. But they’re on their own for drug expenses in-between… known as the “doughnut hole”. Starting this year, Medicare recipients who fall in that hole will get $250, in 2011 they will get a 50% discount on brand-name drugs, and by 2020, the doughnut hole will be closed with 75% of drugs costs covered.
Eight positives: But what about the negatives?
We’ve seen the positives, or at least potential positives, in health care reform. But if that were all there were, your TV screen wouldn’t have been filled with protesters night after night these last few months. So what’s the beef? The first is cost. The argument? Just because something helps somebody doesn’t mean we can afford it.
Over the next 10 years the cost of this reform is expected to be just short of a trillion dollars. Where is it coming from?
- Fees on drug companies and insurers.
- An excise tax of 10% on overly generous health plans.
- A 2.9% tax on the sale of medical devices.
- A 3.8% tax hike in your Medicare payroll taxes and on your investment income if you make more than $250,000/yr.
- Fees on employers who don’t offer required coverage.
- Fees on people who don’t get mandated coverage.
- A 10 percent excise tax on tanning salons.
According to the Congressional Budget Office, these sources of revenue more than offset the $940 billion cost of health care reform. Not a penny coming from any individual taxpayer other than those who don’t comply or those that are making more than $250,000/yr. Employers (especially large ones) will be forced to offer coverage and that could divert funds for other uses, like hiring more workers. So when it comes to cost, there’s definitely room for debate. Does the government actually have it right in terms of the money coming in and going out? Will the additional company expense crimp hiring? Won’t these fees just get passed along to consumers anyway, creating higher costs? Will medicare benefits be cut? Will Medicare reimbursement for doctors get reduced, causing some to leave the profession just as we need more to join it?
All good questions. But hardly the only ones. For example, is it constitutional to force a free people to buy health insurance from for-profit companies? Is it the obligation of those who work hard and buy health insurance to suffer any inconvenience at all to provide for those who don’t?
My personal opinion on health care reform doesn’t really matter, but if you want it, here it is. First, understand that I’m not a democrat, a republican, a tea-partier or an independent. I’m a consumer reporter, which means that my job is often about helping “the little people” battle infinitely more powerful and less-principled corporations.
Now that you know where I’m coming from, here’s my opinion: It’s an absolute disgrace for the most powerful and prosperous nation on earth to allow it’s citizens to go bankrupt simply because they get sick. And we’re the only prosperous country in the world that watches it happen to hundreds of thousands of it’s citizens of every race and economic status each and every year. That’s wrong, period. The health insurance industry needs reform.
Further recent evidence: My personal health insurance bill went up 40% this year. The CEO of the company that issued my policy, United Healthcare, received about 100 million dollars just last year. That’s enough to pay the $500 a month health insurance premiums for a full year for 17,500 people.
I’ll stop short of saying health care reform as passed is great or even acceptable. I honestly don’t know, and with the complexity of the issues involved, I can’t imagine how anyone else can either. But I am convinced of this: something needs to be done. So if you you’re one of the many who doesn’t agree with what was done, I’d love to hear your ideas on what should be done instead. As long as your idea isn’t “nothing.” Because I’m here to tell you, that wasn’t working.
To see what other bloggers think of the new law, a couple more links: Stew over at Gather Little by Little shares his thoughts on the recent healthcare legislation and Mark Riddix of Money Crashers further describes how the new health insurance laws affect you.
Note: the health care reform law is thousands of pages long. For a summary, see this 13-page publication from the Kaiser Family Foundation.